Thursday, December 20, 2012

Worsening investment climate demoralises private sector

Prolonged uncertainty,
lack of policy clarity, and government apathy towards export promotion coupled
with the worsening investment climate and rising cost of production have
demoralised the private sector.

"The economy has
never been a priority for the government," said president of Confederation
of Nepalese Industries (CNI) Binod Chaudhary here today.

"Political parties
have used the private sector only to strengthen their hold," he said,
adding that the manufacturing sector's contribution to the gross domestic
product (GDP) has come down to 5.9 per cent, the lowest in a decade, from over
10 per cent earlier, reflecting the mood of the private sector. "Due to
the declining productivity of labour and increasing cost of capital, cost of
production has also spiralled making Nepali products less competitive."

The worsening investment
climate has pulled the private sector's morale down, said senior vice president
of CNI Narendra Basnyat. "Security of investment and property is key to
boost investment climate," he said, adding that the private sector has
become a victim of prolonged uncertainty and policy illusion.

"Political parties
have mixed economy with politics," according to vice president of CNI and
executive director of Deurali-Janta Pharmaceuticals Hari Bhakta Sharma.
"Highly politicised labour unions have also spoiled the investment
climate," he added.

Nepal had the second
lowest minimum wage ($33.54 per month) in South Asia, according to the
International Labour Organisation (ILO). In 2006, it increased by 35.21 per
cent, the highest increase compared to any other South Asian countries to
$45.36 per month. As of 2011, Nepal has the highest minimum wage in South Asia
($83.76 per month), followed by Pakistan ($82.17 per month), India ($64.07 per
month), Sri Lanka ($51.22 per month), and Bangladesh ($40.46 per month),
according to the ILO data.

The private sector has
more than 70 per cent investment but the sector has been taken hostage by the
political parties to fulfill their vested interests, forcing the people to
suffer and leading to higher imports.

The government itself is
not interested in promoting exports, said managing director of Shivam Cement —
that employs around 350 and has an investment of around Rs five billion — Satis
More.

"There is a huge
demand for cement in the country and investors have also been attracted to
invest in the sector but frequent disturbances in the cement companies by some
groups have always been posing a security threat," he said, adding that
unless the government provides security to the industries, the country will never
be able to substitute imports leading to huge trade deficit.

A decade of CNI

KATHMANDU:
Confederation of Nepalese Industries (CNI) will organise its 10th annual
general meeting on Saturday. "We have invited Nobel Laureate Prof Muhammad
Yunus as a key note speaker for our 10th anniversary," said CNI president
Binod Chaudhary, who has been leading CNI since its establishment.
"However, this time, the institution will see a new leadership," he
said, indicating that senior vice president Narendra Basnyat might lead CNI.